Piper Sandler will not issue a year-end price target for the S&P 500 (^GSPC) after concluding that the index no longer accurately reflects stock market performance.
Piper Sandler co-chief investment strategist Michael Kantrowitz explained the firm’s thinking in a video interview with Yahoo Finance.
“When we were thinking about raising our target again over the last few months, we just didn’t feel very comfortable being intellectually honest about being able to say with any degree of certainty where the S&P 500 was going to end up,” Kantrowitz said, “and we also didn’t think it would really add value to our clients, who are institutional investors.”
A handful of high-performing stocks, including the “Magnificent Seven” tech names like Alphabet (GOOG, GOOGL), Apple (AAPL), and Tesla (TSLA), are having a major impact on market movements, according to a Piper Sandler memo.
Piper Sandler found that the top 10 stocks accounted for 75% of the index’s year-to-date returns, and, as Yahoo Finance’s Josh Schafer noted, AI darling Nvidia (NVDA) was singlehandedly responsible for nearly a third of the S&P 500’s gains as of late June.
Kantrowitz stressed the importance of having a bullish or bearish view on the market, and reiterated that Piper Sandler maintains a bullish outlook for this year. The firm’s year-end target price for the S&P 500 was previously 5,250. On Monday, the index closed at 5,572.
But Kantrowitz noted that investors view large and small caps differently due to their differing performance: The S&P 500 hit an all-time high in the second quarter of this year, while the average fell.
Kantrowitz told Yahoo Finance that rather than focusing on the S&P 500, he encourages his clients to prioritize “quality at a fair price” by focusing on companies that are outperforming their peers in terms of earnings growth but aren’t the most expensive.
“You may have to sacrifice some quality growth to find stocks that aren’t prohibitively expensive,” he said. “There are 50 stocks that have outperformed the S&P 500 this year, and it’s not just AI or technology.”
Earlier this year, as the record rally continued to gain momentum, several strategists raised their targets for the S&P 500. Eventually, they found it hard to keep up, and more strategists may take a similar approach to Piper Sandler and pivot away from monitoring the index.
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Year to date, the S&P 500 is up nearly 17%.
Traders work on the floor of the New York Stock Exchange on June 18. (Spencer Pratt/Getty Images) (Spencer Pratt via Getty Images)
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